Stocks Rally Ahead of Big Week for Rates, Earnings: Markets Wrap

(Bloomberg) -- US stock futures strengthened on the back of equity gains in Europe and Asia, signaling rising optimism ahead of major central bank decisions and big tech earnings due this week.

The Nasdaq 100 and S&P 500 indexes are both set to extend their rebound for a second day after last week’s tech-fueled slump. Treasury yields declined four basis points to 4.15%, while the dollar strengthened against a basket of currencies. Europe’s benchmark stock gauge rose 0.4%.

Monetary policy decisions in the US, Japan and the UK will be taking center stage for investors in the coming days. Traders will be looking for answers about the near-term path of interest rates, after markets had been upended by conflicting signals from key economies.

Also in focus this week are earnings including Apple Inc, Amazon.com Inc and Microsoft Corp. following an underwhelming start to the reporting season for tech megacap companies.

“If it goes well for the remaining members of the Magnificent Seven, it could stop this movement toward a correction that we just had,” said Jacques Henry, head of cross-asset research at Silex in Geneva. “It could turn out to be an interesting entry point for investors.”

Meanwhile, cryptocurrency-linked stocks rallied during premarket-trading after Donald Trump said he’ll turn the US into the “crypto capital” of the world if he returns to the White House. Bitcoin also rose, extending gains to the highest level in six weeks.

Abbott Laboratories shares dropped after the company was ordered to pay almost $500 million over allegations linked to its premature-infant formula. In Europe, Heineken NV slumped after taking an €874 million ($949 million) impairment.

In currencies, the yen extended last week’s rally before erasing the gains. Still, the unit remains on course to post its best monthly performance against the dollar for 2024.

The Bank of Japan is expected to release details of plans to cut monthly bond purchases at the conclusion of its two-day policy meeting on Wednesday, while most economists also see the possibility of an interest rate hike.

Hours later, the US Federal Reserve is likely to signal its intention to cut rates in September, according to economists surveyed by Bloomberg. Money markets are fully pricing a September move, with a chance of two more by year-end, according to swaps data compiled by Bloomberg.

“While the July FOMC meeting is likely too soon to initiate the cut, it is not too early to begin preparations for a rate reduction in September,” wrote Stephen Gallagher, an economist at Societe Generale.

As for the Bank of England, most economists expect it to reduce rates for the first time on Aug. 1 since the start of the pandemic, although a close vote is anticipated.

In commodities, oil traded near a six-week low as doubts over global demand overshadowed positive Chinese economic data and renewed tension in the Middle East. Gold was little change, with its proponents tipping the precious metal as the best portfolio hedge in the event that Trump retakes the White House.

Key events this week:

Some of the main moves in markets:

Stocks

Currencies

Cryptocurrencies

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Subrat Patnaik and Catherine Bosley.